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Coldstream Corp. is comparing two different capital structures. Plan I would result in Coldstream Corp. is comparing two different capital structures. Plan I would result

Coldstream Corp. is comparing two different capital structures. Plan I would result in Coldstream Corp. is comparing two different capital structures. Plan I would result in
7,500 shares of stock and $100,000 in debt. Plan II would result in 6,600 shares of stock
and $120,000 in debt. The interest rate on the debt is 6 percent.
a. Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT
will be $50,000. The all-equity plan would result in 12,000 shares of stock
outstanding. What is the EPS for each of these plans? (Do not round intermediate
calculations and round your answers to 2 decimal places, e.g.,32.16.)
b. In part (a), what are the break-even levels of EBIT for each plan as compared to that
for an all-equity plan? (Do not round intermediate calculations.)
c. Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and II?(Do not
round intermediate calculations.)
d-1. Assuming that the corporate tax rate is 23 percent, what is the EPS of the firm? (Do
not round intermediate calculations and round your answers to 2 decimal places,
e.g.,32.16.)
d-2. Assuming that the corporate tax rate is 23 percent, what are the break-even levels
of EBIT for each plan as compared to that for an all-equity plan? (Do not round
intermediate calculations.)
d-3. Assuming that the corporate tax rate is 23 percent, at what level of EBIT will EPS be
identical for Plans I and II?(Do not round intermediate calculations.)
7,500 shares of stock and $100,000 in debt. Plan II would result in 6,600 shares of stock
and $120,000 in debt. The interest rate on the debt is 6 percent.
a. Ignoring taxes, compare both of these plans to an all-equity plan assuming that EBIT
will be $50,000. The all-equity plan would result in 12,000 shares of stock
outstanding. What is the EPS for each of these plans? (Do not round intermediate
calculations and round your answers to 2 decimal places, e.g.,32.16.)
b. In part (a), what are the break-even levels of EBIT for each plan as compared to that
for an all-equity plan? (Do not round intermediate calculations.)
c. Ignoring taxes, at what level of EBIT will EPS be identical for Plans I and II?(Do not
round intermediate calculations.)
d-1. Assuming that the corporate tax rate is 23 percent, what is the EPS of the firm? (Do
not round intermediate calculations and round your answers to 2 decimal places,
e.g.,32.16.)
d-2. Assuming that the corporate tax rate is 23 percent, what are the break-even levels
of EBIT for each plan as compared to that for an all-equity plan? (Do not round
intermediate calculations.)
d-3. Assuming that the corporate tax rate is 23 percent, at what level of EBIT will EPS be
identical for Plans I and II?(Do not round intermediate calculations.)
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